We are used to thinking about inequality within countries--about rich Americans versus poor Americans, for instance. But what about inequality between all citizens of the world? Worlds Apart ...addresses just how to measure global inequality among individuals, and shows that inequality is shaped by complex forces often working in different directions. Branko Milanovic, a top World Bank economist, analyzes income distribution worldwide using, for the first time, household survey data from more than 100 countries. He evenhandedly explains the main approaches to the problem, offers a more accurate way of measuring inequality among individuals, and discusses the relevant policies of first-world countries and nongovernmental organizations.
The paper investigates the relationship between income inequality and future income growth rates of households at different points of the income distribution. The analysis uses micro-census data from ...U.S. states covering the period from 1960 to 2010, and controls for exposure to imports from China and share of routine jobs, among other variables. It finds evidence that high levels of inequality reduce the income growth of the poor but, if anything, help the growth of the rich.
The paper reestimates global inequality between 1820 and 1980, reappraises the results up to 2013, and presents new inequality estimates for 2018. It shows that historically, global inequality has ...followed three eras: the first, from 1820 until 1950, characterized by rising income differences both between and within countries; the second, from 1950 to the last decade of the 20th century, with very high global and between-country inequality; and the current one of decreasing inequality thanks to the rise of Asian incomes, and especially so Chinese. The present era has seen the emergence of the global “median” class (people with per capita annual incomes ranging between $PPP 3,000 and $PPP 5,000) and the greatest reshuffling in income positions between the West and China since the Industrial Revolution. Absolute income differences in the past 30 years have however increased, and the income gap between the “core” and the poor “periphery” (if China is excluded) remains large: the ratio between median income in the core and periphery in 2018 exceeds 8 to 1 in PPP terms, and 22 to 1 in nominal dollars. The evolution of global inequality in the future will much more depend on what happens to the growth rates and inequality in India and large African countries than on China, as well as on the negative impact of climate change.
For the first time in history, the globe is dominated by one economic system. Capitalism prevails because it delivers prosperity and meets desires for autonomy. But it also is unstable and morally ...defective. Surveying the varieties and futures of capitalism, Branko Milanovic offers creative solutions to improve a system that isn't going anywhere.
The paper uses the flexibility of household survey data to align their income categories and recipient units with the income categories and units found in data produced by tax authorities. Our ...analyses, based on a standardized definition of fiscal income, allow us to locate, for top-income groups, the sources of discrepancy. We find, using the cases of the United States, Germany, and France, that the results from survey-based and tax data correspond extremely well (in terms of total income, mean income, composition of income, and income shares) above the 90th percentile and up to the top 1% of the distribution. Information about income composition, available in the US, allows us to investigate the determinants of this gap in the US. About three-fourths of the tax/survey gap is due to differences in non-labor incomes, especially self-employment (business) income. The gap itself may be due to tax-induced re-classification of income from corporate to personal or/and to lower ability of surveys to capture top 1% incomes.
Suppose that all people in the world are allocated only two characteristics over which they have (almost) no control: country of residence and income distribution within that country. Assume further ...that there is no migration. We show that more than one-half of variability in income of world population classified according to their household per capita in 1% income groups (by country) is accounted for by these two characteristics. The role of effort or luck cannot play a large role in explaining the global distribution of individual income.
This article presents an overview of calculations of global inequality, recently and over the long term, and outlines the main controversies and political and philosophical implications of the ...findings. It focuses in particular on the winners and losers of the most recent episode of globalization, from 1988 to 2008. It suggests that the period has witnessed the first decline in inequality between world citizens since the Industrial Revolution. However, the decline can be sustained only if countries' mean incomes continue to converge (as they have been doing during the past ten years) and if internal (within‐country) inequalities, which are already high, are kept in check. Mean‐income convergence would also reduce the huge ‘citizenship premium’ that is enjoyed today by the citizens of rich countries.
Development is about people: either poor people have ways to become richer where they are now, or they can become rich by moving somewhere else. Looked at from above, there is no real difference between the two options. But from the point of view of real politics, there is a whole world of difference.
We present an improved panel database of national household surveys between 1988 and 2008. In 2008, the global Gini index is around 70.5%, having declined by approximately 2 Gini points. China ...graduated from the bottom ranks, changing a twin-peaked global income distribution to a single-peaked one and creating an important global “median” class. 90% of the fastest growing country-deciles are from Asia, while almost 90% of the worst performers are from mature economies. Another “winner” was the global top 1%. Hence the global growth incidence curve has a distinct supine S shape, with gains highest around the median and top.
The paper uses fifty-three social tables, ranging from Greece in 330 BCE to Mexico in 1940 to estimate the share and level of income of the top 1 % in pre-industrial societies. The share of the top 1 ...% covers a vast range from around 10 % to more than 40 % of society's income and does not always move together with the estimated Gini coefficient and the Inequality Extraction Ratio. I provide a taxonomy of pre-industrial societies based on the social class and type of assets (land, control of government, merchant capital, citizenship) that are associated with the top classes as well as lack of assets associated with poverty.
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